So I have inside information

Discussion in 'Trading' started by gunslinger, Jun 25, 2006.

  1. Let me start off by saying I have been in the business for 15+ years and have never come across "genuine" inside info. Of course I have gotten the "My friend knows the CEO and he says..." at least a few times a year, but it has always been meaningless.

    A few days ago I had a drink with a CEO to discuss certain issues totally unrelated to market or his business. In the conversation he told me that he has been under a huge amount of pressure b/c due to the nature of his biz, he will have to make an announcement within the next week stating that his co's earinings will be way down for the next year.

    It is a small-mid cap stock, followed by a few well respected boutique brokerages. I met this person only this one time and have no line to him (though my father does business with him).
    I will not be using this info, nor will I be passing it onto others (too much of a pussy I guess). My question is what would you do?
  2. supposedly a free society, but if u own stock and stumble onto bad news from an insider, apparently you're not allowed to sell it or else risk going to jail. ie martha stewart.

  3. Neodude


    Weight the risk to reward relationship. If its too high then don't trade on it. On the other hand if based on the probability of getting caught versus the financial gain is relatively small... you should know the answer. Businesses make this type of decision all the time, just look at the viox fallout. Remember its a dog eat dog out there. I think its really stupid that there are insider trader rules... they are a hinderance to efficient markets.

    PS. Revealing this information in a trading forum, where your ip address is tracked is not going to help you if there is ever an investigation.

    PPS. An alternative strategy is to use this information to trade instruments or other securities that might be effected by this information. Is there a stock which is closely correlatted with this company? Does this company represent a large weight in a sector index that is tradable... many possibilies on how this information can have spill over effects on things that would not make you liable for insider trading.

  4. gunslinger, if I were you, I'd just pass on the info to that 63-year-old retired seamstress in Croatia, Sonja Anticevic. She'll know exactly what to do with it, and the SEC will never suspect someone like her... again. :D
  5. SteveD


    1. Remember you are trading "traders" not trading "companies". This news may be in the price already. The loss may be less than traders expect. You short and get killed.

    2. I am not sure you would be guilty of insider trading.

    3. Martha Stewart was not guilty of insider trading. She was guilty of lying to the Feds when they asked her about it.

    4. Small mid size company probably won't attract too much attention.

  6. You're foolish for even posting about it on the internet.

    Actually, you're an idiot as now that you posted publlicly about it you could be jeopardizing this CEO's entire career due to an obvious off the cuff remark..

    You should have kept it to yourself!!!!!!!!!!!
  7. Dustin


    Set an alert on the stock so when the news hits you maybe aren't the first to get short but if you are quick you can still make some good $ legally.
  8. Chagi


    There is, of course, always the possibility that he was lying to you.
  9. Buy $1000 in Aug puts? Should pay for a nice vacation
  10. Fellas I appreciate the responses, as my decision has already been made, I was curious as to what would you do with this info.

    A special shoutout to Beach Man, maybe you should jump on the reading comprehension band wagon, before delivering well thought out responses.
    #10     Jun 25, 2006